TIDMDPEU
RNS Number : 7920H
DP Eurasia N.V
27 March 2020
For Immediate Release 27 March 2020
DP Eurasia N.V.
("DP Eurasia" or the "Company", and together with its
subsidiaries, the " Group ")
Results for the Year Ended 31 December 2019
Significant online growth drives resilient performance
Highlights
For the year ended
31 December
-----------------------
2019 2018 Change
------------ --------- -------
(in millions of TRY,
unless otherwise
indicated)
Number of stores 765 724 41
Group system sales (1)
Group 1,370.3 1,125.3 21.8%
Turkey 845.7 736.1 14.9%
Russia 503.3 373.5 34.8%
Azerbaijan & Georgia 21.2 15.7 34.8%
Group system sales like-for-like growth(2)
Group(8) 10.7% 10.3%
Turkey 13.1% 9.3%
Russia (based on RUB) 0.7% 16.0%
Group revenue 980.2 856.9 14.4%
Group adjusted EBITDA(3)
(excl. IFRS 16) 124.5 110.6 12.6%
Group adjusted net income
(4) (excl. IFRS 16) 2.9 (7.1) n.m.
Group adjusted net debt(5)
(excl. IFRS 16) 226.5 154.6
Group adjusted EBITDA(3) 189.8 110.6 n.m.
Group adjusted net loss(4) (6.3) (7.1) n.m.
Turkey adjusted EBITDA(3) 134.6 96.5 n.m.
Turkey adjusted EBITDA(3)
(excl. IFRS 16) 108.7 96.5 12.6%
Russia adjusted EBITDA(3) 63.9 23.9 n.m.
Russia adjusted EBITDA(3)
(excl. IFRS 16) 24.5 23.9 2.7%
Financial Highlights
-- Group revenue up 14.4% and system sales up 21.8%, driven by
like-for-like growth and store openings
o Turkish systems sales growth of 14.9%
o Russian system sales growth of 34.8% (17.5% based on RUB)
-- Adjusted EBITDA (excl. IFRS 16) up 12.6% to TRY 124.5 million (2018: TRY 110.6 million)
-- Adjusted net income (excl. IFRS 16) of TRY 3.2 million versus
an adjusted net loss of TRY 7.1 million in 2018
Operational Highlights
-- 41 new stores were added over the last 12 months, bringing the total number to 765
-- Turkey and Russia continue to leverage online ordering; share
of delivery system sales reached 70% for the year (2018: 61%)
-- Group online system sales(7) growth of 39.8%
o Turkish online system sales(7) growth of 33.5%
o Russian online system sales(7) growth of 49.0% (29.9% based on
RUB)
-- Management appointments completed in Russia and strategies to
improve performance are already being implemented
Current Trading
System sales growth and like-for-like growth for the first two
months of 2020 were as follows:
For the two months
ended 29 February
Group system sales growth(1) 2020
Group 21.7 %
Turkey 26.1%
Russia 14.2%
Azerbaijan & Georgia 40.5%
Group system sales like-for-like growth(2)
Group(8) 13.9%
Turkey 21.2%
Russia (based on RUB) -10.4%
The robust like-for-like growth in Turkey experienced in Q4'2019
has continued into the current year. The Group is focused on
addressing the issues and challenges in Russia, including
appointing new management and adopting a new marketing strategy. In
Russia, the Group's advertising spend was materially higher in the
first half of 2019 compared to its budgeted advertising expenses
for the same period in 2020, as management is budgeting a flatter
profile of advertising through the current year, and plans to use
celebrity endorsement, a different channel mix, and simpler,
price-led advertisements. This year will be a year of transition in
Russia in which the Group will focus on getting the new team
established and strengthening the operating model, whilst also
adapting its strategic approach.
Outlook
Whilst the Group remains comfortable with its medium-term
financial guidance, the Board is mindful of the considerable
current uncertainty surrounding the spread of the COVID-19 outbreak
and its impact on the business and wider economy in the countries
in which the Group operates. Therefore, the Board is not in a
position to provide meaningful guidance on the likely financial and
operating results for the current year.
The Board believes that certain features of the Group's business
may help it withstand the adverse impact of the pandemic including
the essential nature of food services to consumers, its focus on
delivery to customers, the growing reluctance of customers to leave
their homes to dine out or buy groceries for fear of contracting
the virus, and the affordable nature of the product at a time when
domestic budgets may be under pressure. In the year to date, the
pandemic has had a relatively small impact on the business with the
exception of a reduction in dine in business in our Turkish
restaurants (although our delivery and take out operations continue
as normal).
There is no indication whether governmental measures will have
an effect in preventing a further spread of the disease around the
world and therefore the duration of the pandemic. If the pandemic
and its impact on the business last for a protracted period, it is
likely to have a more detrimental effect on the financial
performance of the Group. The Group has taken proactive measures to
ensure that its customers and employees continue to be safe and has
established an internal task force to ensure that the supply chain
is managed, critical inventory is available, and restaurants remain
adequately staffed. The Group appreciates that the Turkish
government has indicated its preparedness to support companies and
encourage banks to maintain access to credit facilities so as to
assist the corporate sector manage through the crisis and maintain
employment.
The Board is closely monitoring the potential impact of the
pandemic on the Group, particularly with regard to the wellbeing of
our colleagues and customers, has a comprehensive contingency plan
in place and will further update the financial market in due
course.
The Russia Plan
The Group is implementing a detailed plan to address the
challenges in the Russian market and continues to take proactive
steps, including:
i. hiring a new management team comprising CEO, COO and CFO;
ii. making long term improvements to product, service and
technology and further investment in the brand ;
iii. adopting a new marketing strategy making use of celebrity
endorsement, cluster-based pricing, different channel mix, and
simpler, price-led advertisements ;
iv. launching new products at entry level pricing;
v. creating regional castles - starting with the Krasnodar area in the south;
vi. expanding the use of corporate stores as well as franchise
stores on to the aggregator platform ; and
vii. cost cutting measures.
Commenting on the results, Chief Executive Officer, Aslan
Saranga said:
"On behalf of the Board, I am pleased to report another year of
solid growth in 2019. We continued to grow our store portfolio,
adding 41 stores during 2019 and reaching a total of 765 stores
across our four countries of operations.
"The Turkish business performed strongly in 2019 despite macro
headwinds and posted a rising performance in each successive
quarter. Due to the recovery in macro parameters, the strong
momentum has continued in Turkey into Q1 2020.
"In Russia, we successfully resolved certain issues with
regional franchisees by acquiring and converting their stores to
corporate stores. The challenge in Russia in terms of like-for-like
growth in 2019 was mainly attributable to record advertising spend
by online aggregators fighting for market dominance and increasing
delivery fast food competition through the aggregators. We have
completed the appointment of our Russian management team and
launched a new marketing strategy in Russia with effect from the
end of February to address the new market dynamics.
"We continue to focus on product innovation to drive growth; a
key element of the Group's success to date. Following our
introduction of the co-branded KitKat(R) chocolate pizza and
"Dürümos" wrap, we introduced four additional types of oven-baked
sandwiches in Turkey. We have relaunched the wrap and the pizza
Quadro (rectangular pizza) at attractive entry level prices in
Russia. Additionally, we will start trialling the loyalty programme
in Russia during 2020.
"Digital continues to drive our business forward with
significant growth achieved in both of our markets. Online ordering
as a percentage of delivery has reached 70% across the Group, an
increase of more than nine percentage points from 2018, with the
Russian business exceeding 80%.
"The Board is closely monitoring the potential impact of the
COVID-19 pandemic on the Group, particularly with regard to the
wellbeing of our colleagues and customers. It has a comprehensive
contingency plan in place and will further update the financial
market in due course."
Enquiries
DP Eurasia N.V.
Selim Kender, Chief Strategy Officer &
Head of Investor Relations +90 212 280 9636
Buchanan (Financial Communications)
Richard Oldworth / Victoria Hayns / Tilly +44 20 7466 5000
Abraham dp@buchanan.uk.com
A conference call will be held at 9.30am (GMT) on 27 March 2020
for analysts and investors via the following dial-in details:
Conference UK Toll: +44 3333000804
call: UK Toll Free: 08003589473
Participant PIN code: 32473974 #
URL for international dial in numbers:
http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf
DP Eurasia N.V.'s 2019 results and corporate presentation are
available at www.dpeurasia.com . A conference call replay will be
available on the website in due course.
Notes
(1) System sales are sales generated by the Group's corporate
and franchised stores to external customers and do not represent
revenue of the Group.
(2) Like-for-like growth is a comparison of sales between two
periods that compares system sales of existing system stores. The
Group's system stores that are included in like-for-like system
sales comparisons are those that have operated for at least 52
weeks preceding the beginning of the first month of the period used
in the like-for-like comparisons for a certain reporting period,
assuming the relevant system store has not subsequently closed or
been "split" (which involves the Group opening an additional store
within the same map of an existing store or in an overlapping
area).
(3) EBITDA, adjusted EBITDA and non-recurring and non-trade
income/expenses are not defined by IFRS. These items are determined
by the principles defined by the Group management and comprise
income/expenses which are assumed by the Group management to not be
part of the normal course of business and are non-trading items.
These items which are not defined by IFRS are disclosed by the
Group management separately for a better understanding and
measurement of the sustainable performance of the Group. Please
refer to Note 3 in the Consolidated Financial statements for a
reconciliation of these items with IFRS.
(4) Adjusted net income is not defined by IFRS. Adjusted net
income excludes income and expenses which are not part of the
normal course of business and are non-recurring items. Management
uses this measurement basis to focus on core trading activities of
the business segments and to assist it in evaluating underlying
business performance. Please refer to Note 3 in the Consolidated
Financial statements for a reconciliation of this item with
IFRS.
(5) Net debt and adjusted net debt are not defined by IFRS.
Adjusted net debt includes cash deposits used as a loan guarantee
and cash paid, but not collected during the non-working day at the
year end. Management uses these numbers to focus on net debt
including deposits not otherwise considered cash and cash
equivalents under IFRS. Please refer to Note 16 in the Consolidated
Financial statements for a reconciliation of these items with
IFRS.
(6) Delivery system sales are system sales of the Group
generated through the Group's delivery distribution channel.
(7) Online system sales are system sales of the Group generated
through its online ordering channel.
(8) Group like-for-like growth is a weighted average of the
country like-for-like growths based on store numbers as described
in Note (2) above.
Notes to Editors
DP Eurasia N.V. is the exclusive master franchisee of the
Domino's Pizza brand in Turkey, Russia, Azerbaijan and Georgia. The
Company was admitted to the premium listing segment of the Official
List of the Financial Conduct Authority and to trading on the main
market for listed securities of the London Stock Exchange plc on 3
July 2017. The Company (together with its subsidiaries, the " Group
" ) is the largest pizza delivery company in Turkey and the third
largest in Russia. The Group offers pizza delivery and takeaway/
eat-in facilities at its 765 stores (550 in Turkey, 203 in Russia,
eight in Azerbaijan and four in Georgia as at 31 December 2019),
and operates through its owned corporate stores (32%) and
franchised stores (68%). The Group maintains a strategic balance
between corporate and franchised stores, establishing networks of
corporate stores in its most densely populated areas to provide a
development platform upon which to promote best practice and
maximise profitability. The Group has adapted the Domino's Pizza
globally proven business model to its local markets.
Performance Review
For the year ended
System Sales 31 December
-------------------------------
2019 2018 Change
--------------- -------------- -------
(in millions of TRY,
unless otherwise indicated)
Group system sales (1)
Group 1,370.3 1,125.3 21.8%
Turkey 845.7 736.1 14.9%
Russia 503.3 373.5 34.8%
Azerbaijan & Georgia 21.2 15.7 34.8%
Group system sales like-for-like
growth(2)
Group(8) 10.7% 10.3%
Turkey 13.1% 9.3%
Russia (based on RUB) 0.7% 16.0%
Store Count As at 31 December
----------------------------------------------------------------
2019 2018
Corporate Franchised Total Corporate Franchised Total
Turkey 123 427 550 137 398 535
Russia 121 82 203 101 78 179
Azerbaijan - 8 8 - 6 6
Georgia - 4 4 - 4 4
Total 244 521 765 238 486 724
DP Eurasia achieved strong operational growth in the year, with
a further 41 stores added to the store portfolio. The Group
increased its system sales by 21.8% year-on-year, driven by a
combination of like-for-like sales growth and store openings.
The Turkish operations' system sales, representing 62% of Group
system sales, increased by 14.9%. Despite the slow start to the
year due to the lingering effects of the 2018 macro volatility, the
Group achieved 13.1% like-for-like growth in Turkey, mainly
attributable to the strategies that were undertaken in sales and
marketing. The "Dürümos" wrap launch, celebrity endorsed
advertising campaigns and cluster-based pricing combined with the
rapidly improving macroeconomic parameters in the second half of
the year drove growth. As a result of the volatile situation in the
first half of the year, a total of 17 stores were opened in the
Turkish segment. Active management and optimisation of the Turkish
estate, which is ordinary course of business for the Group,
continued in 2019. 26 stores were transferred from corporate to
franchisee ownership, with an additional eight transfers in the
opposite direction.
The Russian operations' system sales, representing 37% of Group
system sales, increased by 34.8% (17.5% based on RUB). This
increase was driven primarily by store openings. The Russian
operations achieved like-for-like sales growth of 0.7% for the
year, with growth affected by the increased competition especially
in terms of aggregators and fast food players that are supported by
them. The Group intends to replicate the success it had turning
around like-for-like growth in Turkey in early 2019 by deploying
similar strategies in Russia in 2020, including celebrity endorsed
advertising campaigns and cluster-based pricing. The regional
franchisee disagreements were resolved with the Group acquiring a
majority of the stores in the regions. A total of 22 stores were
acquired in Russia during 2019, while the Group continued its
refranchising efforts with 20 stores transferred from corporate to
franchisee ownership. Russian franchised stores amounted to 82,
representing 40% of the Russian store portfolio.
Delivery Channel Mix and Online like-for-like growth
The following table shows the Group's delivery system sales,
analysed by ordering channel and by the Group's two largest
countries in which it operates, as a percentage of delivery system
sales:
For the year ended 31 December
--------------------------------------------------
2019 2018
------------------------ ------------------------
Turkey Russia Total Turkey Russia Total
Store 32.0% 18.0% 27.8% 42.4% 23.9% 37.1%
Group's online
Online platform 28.5% 80.5% 47.0% 30.2% 76.1% 44.7%
Aggregator 35.7% 1.5% 22.8% 24.2% - 16.1%
Total online 64.2% 82.0% 69.9% 54.4% 76.1% 60.8%
Call centre 3.8% - 2.3% 3.1% - 2.1%
Total(6) 100% 100% 100% 100% 100% 100%
The following table shows the Group's online like-for-like
growth (2) , analysed by the Group's two largest countries in which
it operates:
For the year ended
31 December
---------------------
2019 2018
---------- ---------
Group online system sales like-for-like growth(2)(7)
Group(8) 29.3% 35.4%
Turkey 32.6% 33.7%
Russia (based on RUB) 15.4% 43.5%
The Group's like-for-like growth continues to be driven mainly
by the performance of its online ordering platforms. Online
delivery system sales as a share of delivery system sales reached
70% for the year, which represents a 9.1 percentage point increase
on a year-on-year basis.
In Turkey, online system sales like-for-like growth for the
period was 32.6%, as a result of which online delivery system sales
as a share of delivery system sales reached 64.2% for the period, a
9.8 percentage point increase from a year ago, aided also by an
increase in volumes through the aggregator.
In Russia, online system sales like-for-like growth for the
period was 15.4%, as a result of which online delivery system sales
as a share of delivery system sales reached 82.0% for the period, a
5.9 percentage point increase from a year ago.
Online system sales continued to outpace the overall system
sales growth at 39.8% for the Group. Turkish online system sales
grew by 33.5%, while Russian online system sales grew by 49.0%
(29.9% based on RUB).
Financial Review
For the year ended
31 December
-----------------------
2019 2018 Change
----------- ---------- --------
(in millions of TRY)
Revenue 980.2 856.9 14.4%
Cost of sales (excl. IFRS 16) (645.7) (566.3) 14.0%
Gross Profit (excl. IFRS 16) 334.5 290.6 15.1%
General administrative expenses
(excl. IFRS 16) (154.0) (136.1) 13.1%
Marketing and selling expenses (137.0) (104.3) 31.4%
Other operating expenses, net
(excl. IFRS 16) 15.1 3.1 385.9%
Operating profit (excl. IFRS
16) 58.5 53.3 9.8%
Foreign exchange (losses)/gains
(excl. IFRS 16) 6.8 (18.8) n.m.
Financial income (excl. IFRS
16) 2.4 5.5 (57.0)%
Financial expense (excl. IFRS
16) (49.3) (43.9) 12.4%
(Loss)/Profit before income
tax (excl. IFRS 16) 18.4 (3.9) n.m.
Tax expense (excl. IFRS 16) (14.8) (7.2) 105.1%
(Loss)/Profit after tax (excl.
IFRS 16) 3.6 (11.1) n.m.
Group adjusted EBITDA(3) (excl.
IFRS 16) 124.5 110.6 12.6%
Group adjusted net income (4)
(excl. IFRS 16) 2.9 (7.1) n.m.
Group adjusted net debt(5)
(excl. IFRS 16) 226.5 154.6
Group adjusted EBITDA(3) 189.8 110.6 n.m.
Group adjusted net loss (4) (6.3) (7.1) n.m.
Turkey adjusted EBITDA(3) 134.6 96.5 n.m.
Turkey adjusted EBITDA(3) (excl.
IFRS 16) 108.7 96.5 12.6%
Russia adjusted EBITDA(3) 63.9 23.9 n.m.
Russia adjusted EBITDA(3) (excl.
IFRS 16) 24.5 23.9 2.7%
Revenue
Group revenue grew by 14.4% to TRY 980.2 million. Turkish
segment revenue grew by 15.4% to TRY 559.3 million, while Russian
segment revenue grew by 13.1% to reach TRY 420.9 million.
Adjusted EBITDA
The Board maintains that adjusted EBITDA is the most relevant
indicator of the Group's profitability at this stage of its
development. The Group has adopted IFRS 16 from 1 January 2019 but
has not restated comparatives for the 2018 reporting period, as
permitted under the specific transition provisions in the standard,
the Group has applied the modified retrospective method for
adoption. As such, the Board believes that analysing the adjusted
EBITDA (excluding IFRS 16) serves as a better comparative for the
prior period.
The Group's adjusted EBITDA (excluding IFRS 16) grew by 12.6% to
TRY 124.5 million. Adjusted EBITDA (excluding IFRS 16) for the
Turkish segment, which includes the Azerbaijani and Georgian
businesses, was TRY 108.7 million, a year-on-year increase of
12.6%, and adjusted EBITDA (excluding IFRS 16) for the Russian
segment was TRY 24.5 million, a year-on-year increase of 2.7% (a
decrease of 10.3% based on RUB). Additionally, costs relating to
our Dutch corporate expenses (excluding those that relate to our
initial public offering) reduced adjusted EBITDA by TRY 8.7 million
in 2019. The comparable adverse effect of this item was TRY 9.8
million in 2018.
In 2019, the Group's adjusted EBITDA (excluding IFRS 16) margin
as a percentage of system sales was 9.1% compared to 9.8% in 2018.
The main reasons for the decrease were the reduction in the Russian
segment margin and the mix effect associated with the Russia
segment becoming a larger part of the business.
Adjusted EBITDA (excluding IFRS 16) margin as a percentage of
system sales for the Turkish segment (including Azerbaijan and
Georgia) recorded an immaterial decrease to 12.5% from 12.8% as the
Group was successful in preserving margins.
The Russian segment margin decreased to 4.9% from 6.4%. The main
reason for the decrease is the lower like-for-like growth in Russia
due to increased competition and the longer than expected ramp up
times in regional stores. The Group changed its beverage supplier
in Q3 2019 and began testing on one of the aggregator platforms in
Q4 2019, where it is generating incremental sales. The Board
continues to remain confident in the medium- and long-term
potential of the Russian market for DP Eurasia.
Adjusted Net Income
For the year ended 31 December 2019, adjusted net income
(excluding IFRS 16) was TRY 2.9 million. The increased financial
expenses (excluding IFRS 16) were offset by the increase in
operating profit (excluding IFRS 16). The increase in tax expense
(excluding IFRS 16) was more than offset by the increase in foreign
exchange gains (excluding IFRS 16), resulting in a positive
adjusted net income (excluding IFRS 16). Despite not having any
hard currency denominated loans, the Group recorded a foreign
exchange gain of TRY 6.8 million due to the intragroup loans made
from Turkey to Russia versus a foreign exchange loss of TRY 18.8
million in the previous year.
Capital expenditure and Cash conversion
The Group incurred TRY 106.8 million of capital expenditure in
2019. The Turkish segment capital expenditure was TRY 37.2 million
and the Russian segment capital expenditures amounted to TRY 69.6
million (RUB 800 million). The Russian segment capital expenditure
was higher than previous guidance due to the acquisition of
franchised stores in the regions.
Cash conversion, defined as (adjusted EBITDA (excluding IFRS
16)- capital expenditure)/adjusted EBITDA (excluding IFRS 16)) for
the period was 14.2% (2018: 28.5%) for the Group and 65.8% (2018:
61.9%) for the Turkish segment. The Russian segment had negative
cash conversion as it is in a period of rapid expansion relative to
its size.
Adjusted net debt and Leverage
Excluding the impact of IFRS 16, the Group's adjusted net debt
at 31 December 2019 was TRY 226.5 million. Following the
refinancing of its Euro denominated loans in Russia with a Rouble
denominated bank facility in 2018, the Group does not carry any
hard currency denominated loans on its balance sheet. In 2019, the
Group switched a portion of its Rouble denominated bank loans to
Turkish Lira denominated bank loans to align the currency of its
bank loans more closely with the currency breakdown of its EBITDA.
As a result, at 31 December 2019, 52% of the Group's bank
borrowings were denominated in Turkish Liras, compared to 13% a
year ago, while the remainder is denominated in Roubles.
The Group continues its prudent and conservative approach to
debt and its leverage ratio (defined as adjusted net debt
(excluding IFRS 16)/adjusted EBITDA (excluding IFRS 16)) was 1.8x
as at 31 December 2019 (2018: 1.4x).
The main reasons for the increase in the Group's indebtedness
were the unusually high interest rates in Turkey during the first
three quarters of 2019, RUB's appreciation against the TRY and the
extra capital expenditure incurred for the acquisition of the
regional franchised stores. Currently, more than 90% of the Group's
Turkish Lira denominated bank loans have fixed interest rates for
2020 as the Group looks to take advantage of the relatively lower
interest rates currently available.
Amsterdam, 26 March 2020
The Directors of DP Eurasia N.V. as at the date of this
announcement are as set out below:
Peter Williams*
Aslan Saranga, Chief Executive Officer
Frederieke Slot, Company Secretary
Seymur Tarı*
Izzet Talu*
Aksel ahin*
Thomas Singer*
* Non-Executive Directors
Forward looking statements
This press release includes forward-looking statements which
involve known and unknown risks and uncertainties, many of which
are beyond the Group's control and all of which are based on the
Directors' current beliefs and expectations about future events.
They appear in a number of places throughout this press release and
include all matters that are not historical facts and include
predictions, statements regarding the intentions, beliefs or
current expectations of the Directors or the Group concerning,
among other things, the results of operations, financial condition,
prospects, growth and strategies of the Group and the industry in
which it operates.
No assurance can be given that such future results will be
achieved; actual events or results may differ materially as a
result of risks and uncertainties facing the Group. Such risks and
uncertainties could cause actual results to vary materially from
the future results indicated, expressed, or implied in such
forward-looking statements.
Forward-looking statements contained in this press release speak
only as of the date of this press release. The Company and the
Directors expressly disclaim any obligation or undertaking to
update these forward-looking statements contained in this press
release to reflect any change in their expectations or any change
in events, conditions, or circumstances on which such statements
are based.
Appendices
Exchange Rates
For the year ended 31 December
----------------------------------------------------------
2019 2018
---------------------------- ----------------------------
Currency Period End Period Average Period End Period Average
----------- --------------- ----------- ---------------
EUR/TRY 6.651 6.348 6.028 5.679
RUB/TRY 0.096 0.087 0.075 0.076
EUR/RUB 69.341 72.513 79.461 73.950
Delivery - Take away / Eat in mix
For the year ended 31 December
--------------------------------------------------
2019 2018
------------------------ ------------------------
Turkey Russia Total Turkey Russia Total
Delivery 63.8% 62.2% 63.1% 63.0% 60.2% 62.0%
Take away / Eat
in 36.2% 37.8% 36.9% 37.0% 39.8% 38.0%
Total(2) 100% 100% 100% 100% 100% 100%
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2019 AND 2018
( Amounts expressed in thousands of Turkish Lira (TRY) unless
otherwise stated.)
Notes 31 December 2019 31 December 2018
------------------------------------- --------- ----------------- -----------------
Revenue 4 980,208 856,874
Cost of sales 4 (636,466) (566,250)
------------------------------------- --------- ----------------- -----------------
GROSS PROFIT 343,742 290,624
------------------------------------- --------- ----------------- -----------------
General administrative expenses (150,175) (136,145)
Marketing and selling expenses (137,043) (104,294)
Other operating income 6 22,411 10,466
Other operating expense 6 (7,869) (7,361)
------------------------------------- --------- ----------------- -----------------
OPERATING PROFIT 71,066 53,290
------------------------------------- --------- ----------------- -----------------
Foreign exchange income/(losses) 7 4,665 (18,770)
Financial income 7 16,100 5,508
Financial expense 7 (85,103) (43,927)
------------------------------------- --------- ----------------- -----------------
PROFIT/(LOSS) BEFORE INCOME TAX 6,728 (3,899)
------------------------------------- --------- ----------------- -----------------
Income tax expense 21 (12,344) (7,194)
LOSS FOR THE PERIOD (5,616) (11,093)
------------------------------------- --------- ----------------- -----------------
OTHER COMPREHENSIVE EXPENSE/INCOME (21,708) 10,015
Items that will not be reclassified
to profit or loss
- Remeasurements of post-employment
benefit obligations, net of tax (107) (291)
Items that may be reclassified
to profit or loss
- Currency translation differences (21,601) 10,306
------------------------------------- --------- ----------------- -----------------
TOTAL COMPREHENSIVE LOSS (27,324) (1,078)
------------------------------------- --------- ----------------- -----------------
Loss per share (*) (0.0386) (0.0763)
------------------------------------- --------- ----------------- -----------------
(*) Amounts represent the basic and diluted earnings per share
The accompanying notes, which are in abridged form, form an
integral part of these consolidated financial statements. Please
refer to the Group's Annual Report and Accounts for the full
notes.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2019
( Amounts expressed in thousands of Turkish Lira (TRY) unless
otherwise stated.)
ASSETS Notes 31 December 2019 31 December 2018
--------------------------- -------- ----------------- -----------------
Trade receivables 14 23,422 20,761
Lease receivables 17 39,568 -
Right-of-use assets 11 180,236 -
Property and equipment 9 160,043 136,041
Intangible assets 10 81,424 48,514
Goodwill 12 47,133 45,195
Deferred tax assets 21 18,060 12,187
Other non-current assets 17 35,903 25,389
--------------------------- -------- ----------------- -----------------
Non-current assets 585,789 288,087
--------------------------- -------- ----------------- -----------------
Cash and cash equivalents 13 70,928 28,444
Trade receivables 14 114,493 69,979
Lease receivables 17 16,618 -
Inventories 16 70,062 77,619
Other current assets 17 65,247 45,584
--------------------------- -------- ----------------- -----------------
Current assets 337,348 221,626
--------------------------- -------- ----------------- -----------------
TOTAL ASSETS 923,137 509,713
--------------------------- -------- ----------------- -----------------
The accompanying notes, which are in abridged form, form an
integral part of these consolidated financial statements. Please
refer to the Group's Annual Report and Accounts for the full
notes.
Notes 31 December 2019 31 December 2018
-------------------------------------------- ---------- ----------------- -----------------
EQUITY
Paid in share capital 23 36,353 36,353
Share premium 119,286 119,286
Contribution from shareholders 19,970 20,697
Other reserves
not to be reclassified to profit or loss
- Remeasurements of post-employment
benefit obligations (2,591) (2,484)
Other reserves
to be reclassified to profit or loss
- Currency translation differences (22,288) (687)
Retained earnings (40,332) (34,716)
-------------------------------------------- ---------- ----------------- -----------------
Total equity 110,398 138,449
-------------------------------------------- ---------- ----------------- -----------------
LIABILITIES
Financial liabilities 18 153,159 161,600
Lease liabilities 18 184,708 9,676
Long term provisions for
employee benefits 17 2,051 1,665
Deferred tax liability 21 - 565
Other non-current liabilities 17 37,041 28,373
-------------------------------------------- ---------- ----------------- -----------------
Non - current liabilities 376,959 201,879
-------------------------------------------- ---------- ----------------- -----------------
Financial liabilities 18 164,854 36,541
Lease liabilities 18 71,427 7,789
Trade payables 14 121,178 74,148
Current income tax liabilities 21 8,955 6,971
Provisions 19 5,354 1,816
Other current liabilities 17 64,012 42,120
-------------------------------------------- ---------- ----------------- -----------------
Current liabilities 435,780 169,385
-------------------------------------------- ---------- ----------------- -----------------
TOTAL LIABILITIES 812,739 371,264
-------------------------------------------- ---------- ----------------- -----------------
TOTAL LIABILITIES & EQUITY 923,137 509,713
-------------------------------------------- ---------- ----------------- -----------------
The accompanying notes, which are in abridged form, form an
integral part of these consolidated financial statements. Please
refer to the Group's Annual Report and Accounts for the full
notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2019
( Amounts expressed in thousands of Turkish Lira (TRY) unless
otherwise stated.)
Remeasurement
of
Contribution post-employment Currency
Share Share from benefit translation Retained Total
capital premium shareholders obligations differences earnings Equity
----------------- ----------- ------------ ------------- ---------------- ------------ ----------- ------------
Balances at 1
January 2018 36,353 119,286 18,183 (2,193) (10,993) (23,623) 137,013
Remeasurements
of
post-employment
benefit
obligations,
net - - - (291) - - (291)
Total loss for
the period - - - - - (11,093) (11,093)
Currency
translation
adjustments - - - - 10,306 - 10,306
Total
comprehensive
loss - - - (291) 10,306 (11,093) (1,078)
Share-based
incentive plans
(Note 22) - - 2,514 - - - 2,514
Balances at 31
December 2018 36,353 119,286 20,697 (2,484) (687) (34,716) 138,449
----------------- ----------- ------------ ------------- ---------------- ------------ ----------- ------------
Balances at 1
January 2019 36,353 119,286 20,697 (2,484) (687) (34,716) 138,449
----------------- ----------- ------------ ------------- ---------------- ------------ ----------- ------------
Remeasurements
of
post-employment
benefit
obligations,
net - - - (107) - - (107)
Currency
translation
adjustments - - - - (21,601) - (21,601)
Total loss for
the period - - - - - (5,616) (5,616)
Total
comprehensive
loss - - - (107) (21,601) (5,616) (27,324)
Cancellation of
Share-based
incentive (Note
22) - - (2,729) - - - (2,729)
Share-based
incentive plans
(Note 22) - - 2,002 - - - 2,002
Balances at 31
December 2019 36,353 119,286 19,970 (2,591) (22,288) (40,332) 110,398
The accompanying notes, which are in abridged form, form an
integral part of these consolidated financial statements. Please
refer to the Group's Annual Report and Accounts for the full
notes.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2019
( Amounts expressed in thousands of Turkish Lira (TRY) unless
otherwise stated.)
Notes 2019 2018
------------------------------------------------------- ------ --------- ----------
Profit/(Loss) before income tax 6,728 (3,899)
Adjustments for:
Depreciation 9-11 94,746 37,018
Amortisation 10 21,960 16,250
Gains on sale of property and equipment 6 11 (4,054)
Performance bonus accrual 4,562 7,408
Non-cash employee benefits expense -
share based payments 22 (727) 2,514
Interest income 7 (16,100) (5,508)
Interest expense 7 78,506 41,512
Unrealised foreign exchange losses
on borrowings - 11,473
------------------------------------------------------- ------ --------- ----------
Changes in operating assets and liabilities
Changes in trade receivables (52,348) (10,535)
Changes in other receivables and assets (23,794) (2,156)
Changes in inventories 7,557 (21,360)
Changes in contract assets (294) (1,650)
Changes in contract liabilities 4,246 8,722
Changes in trade payables 47,030 14,078
Changes in other payables and liabilities 27,010 (8,194)
Income taxes paid 21 (15,918) (6,788)
Performance bonuses paid (7,009) (5,876)
------------------------------------------------------- ------ --------- ----------
Cash flows generated from
operating activities 176,166 68,955
------------------------------------------------------- ------ --------- ----------
Purchases of property and equipment 9 (54,715) (49,324)
Purchases of intangible assets 10 (48,228) (24,036)
Disposals from sale of tangible and intangible assets 15,039 25,987
------------------------------------------------------- ------ --------- ----------
Cash flows used in investing activities (87,904) (47,373)
------------------------------------------------------- ------ --------- ----------
Interest paid (40,255) (37,353)
Interest on leases paid (22,031) -
Interest received 1,837 5,508
Loans obtained 165,233 59,848
Loans paid 18 (85,453) (104,957)
Payment of lease liabilities 18 (60,875) (10,653)
Cash flows (used in)
from financing activities (41,544) (87,607)
------------------------------------------------------- ------ --------- ----------
Effect of currency translation differences (4,234) 18,341
------------------------------------------------------- ------ --------- ----------
Net increase in cash and cash equivalents 42,484 (47,684)
------------------------------------------------------- ------ --------- ----------
Cash and cash equivalents at the
beginning of the period 12 28,444 76,128
------------------------------------------------------- ------ --------- ----------
Cash and cash equivalents at the
end of the period 12 70,928 28,444
------------------------------------------------------- ------ --------- ----------
The accompanying notes, which are in abridged form, form an
integral part of these consolidated financial statements. Please
refer to the Group's Annual Report and Accounts for the full
notes.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2019
(Amounts expressed in thousands of Turkish Lira (TRY) unless
otherwise stated.)
NOTE 1 - THE GROUP'S ORGANISATION AND NATURE OF ACTIVITIES
DP Eurasia N.V. (the "Company"), a public limited company,
having its statutory seat in Amsterdam, the Netherlands, was
incorporated under the law of the Netherlands on 18 October 2016.
Upon incorporation Fides Food Systems Coöperatief U.A. and Vision
Lovemark Coöperatief U.A. contributed and transferred all shares in
Fidesrus B.V. and Fides Food Systems B.V. and their subsidiaries to
the Company. From this point forward, the consolidated Group was
formed. This was a transaction under common control.
The consolidated financial statements of DP Eurasia N.V. have
been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union. The consolidated
financial statements also comply with the financial reporting
requirements included in Title 9 of Book 2 of the Dutch Civil Code,
as far as applicable.
The Company's registered address is: Herikerbergweg 238,
Amsterdam, the Netherlands.
The Management report within the meaning of Article 391 of Book
2 of the Dutch Civil Code consists of the following parts of the
annual report:
-- At a glance
-- Highlights
-- Key financial figures
-- Message from CEO
-- Strategic review
-- Remuneration report
-- Corporate governance report
-- How we manage risk
-- Consolidated financial statements: Note 3 - Segment Reporting
-- Consolidated financial statements: Note 24 - Financial
Instruments and financial risk management
The Company and its subsidiaries (together referred to as the
"Group") perform its activities in corporate-owned and franchise
stores in Turkey and the Russian Federation, including providing
technical support, control and consultancy services to the
franchisees.
As at 31 December 2019, the Group holds franchise operating and
sub-franchising right in 765 stores (521 franchise stores, 244
corporate-owned stores) (31 December 2018: 724 stores (486
franchise stores, 238 corporate-owned stores).
The consolidated financial statements as at and for the period
ended 31 December 2019 have been approved and authorized for issue
on 23 March 2020 by authorisation of the Board. The financial
statements are subject to adoption by the Annual General
Meeting.
Subsidiaries
The Company has a total of four fully owned subsidiaries. These
entities and nature of their business is as follows:
2019 2018
Effective Effective
Subsidiaries ownership (%) ownership (%) Registered country Nature of business
-------------------------------------------- -------------- -------------- ------------------- -------------------
Pizza Restaurantları A. . ("Domino's
Turkey") 100 100 Turkey Food delivery
Pizza Restaurants LLC ("Domino's Russia") 100 100 Russia Food delivery
Fidesrus B.V. ("Fidesrus") 100 100 the Netherlands Investment company
Fides Food Systems B.V. ("Fides Food") 100 100 the Netherlands Investment company
Pizza Restaurants LLC ("Domino's Russia") is established in the
Russian Federation. Domino's Russia is operating a pizza delivery
network of corporate and franchised stores in the Russian
Federation. Domino's Russia has a Master Franchise Agreement (the
"MFA Russia") with Domino's Pizza International for the pizza
delivery network in Russia until 2030.
Pizza Restaurantları A. . ("Domino's Turkey") is established in
Turkey. Domino's Turkey is operating a pizza delivery network of
corporate and franchised stores in Turkey. Domino's Turkey is a
food delivery company, which has a Master Franchise Agreement (the
"MFA Turkey") with Domino's Pizza International pizza delivery
network in Turkey until 2032. The Group expects the terms of the
MFAs to be extended.
Fides Food and Fidesrus are established in the Netherlands. Both
Fides Food Systems and Fidesrus are acting as investment
companies.
NOTE 2 - BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS
2.1 Principles of consolidation
The consolidated financial statements include the parent
company, DP Eurasia N.V. and its subsidiaries for the year ended at
31 December 2019. Subsidiaries are fully consolidated from the date
on which control is transferred to the Company (the "acquisition
date").
Basis of Consolidation
The consolidated financial statements include the accounts of
the Group on the basis set out in sections below. The financial
results of the subsidiaries are fully consolidated from the date on
which control is transferred to the Group or deconsolidated from
the date that control ceases.
Subsidiaries are all companies over which the group has control.
The group controls an entity when the group is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power to
direct the activities of the entity.
The subsidiaries fully consolidated, the proportion of ownership
interest and the effective interest of the Group in these
subsidiaries as of 31 December 2019 are disclosed in Note 1.
The result of operations of subsidiaries acquired or sold during
the year are included in the consolidated statement of
comprehensive income from the acquisition date or until the date of
sale.
The statements of financial position and statements of
comprehensive income of the subsidiaries are consolidated on a
line-by-line basis and the carrying value of the investment held by
the Company and its subsidiaries are eliminated against the related
shareholders' equity. Intercompany transactions, balances and
unrealised gains on transactions between group companies are
eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the transferred
asset. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the
Group.
Consolidation of foreign subsidiaries
Financial statements of subsidiaries operating in foreign
countries are prepared in the currency of the primary economic
environment in which they operate. Assets and liabilities in
financial statements prepared according to the Group's accounting
policies are translated into the Group's presentation currency,
Turkish Liras, from the foreign exchange rate at the statement of
financial position date whereas income and expenses are translated
into TRY at the average foreign exchange rate. Exchange differences
arising from the translation are included in the "currency
translation differences" under shareholders' equity.
The foreign currency exchange rates used in the translation of
the foreign operations within the scope of consolidation are as
follows:
31 December 2019 31 December 2018
Period Period Period Period
Currency End Average End Average
Euros 6.6506 6.3484 6.0280 5.6751
Russian Roubles 0.0955 0.0872
0.0753 0.0760
2.2 Functional and presentation currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the "functional
currency").
The consolidated financial statements are presented in TRY,
which is the Group's presentation currency.
NOTE 3 - SEGMENT REPORTING
The business operations of the Group are organised and managed
with respect to geographical positions of its operations. The
information regarding the business activities of the Group as of 31
December 2019 and 2018 comprise the performance and the management
of its Turkish and Russian operations and head office.
The Group has two business segments, determined by management
according to the information used for the evaluation of performance
and the allocation of resources, the Turkish and Russian
operations. Other operations are composed of corporate expenses of
Dutch companies. These segments are managed separately because they
are affected by the economic conditions and geographical positions
in terms of risks and returns.
The segment analysis for the periods ended 31 December 2019 and
2018 are as follows:
1 January-31 December 2019 Turkey Russia Other Total
---------------------------------------- --------- --------- --------- ----------
Corporate revenue 210,833 283,567 - 494,400
Franchise revenue and royalty
revenue obtained from franchisees 314,772 91,440 - 406,212
Other revenue 33,729 45,867 - 79,596
Total revenue 559,334 420,874 - 980,208
- At a point in time 553,396 417,732 - 971,128
- Over time 5,938 3,142 - 9,080
---------------------------------------- --------- --------- --------- ----------
Operating profit 82,664 175 (11,773) 71,066
Capital expenditures 37,171 69,597 - 106,768
Tangible and intangible disposals (4,442) (10,608) - (15,050)
Depreciation and amortization expenses (50,468) (66,238) - (116,706)
Adjusted EBITDA (*) 134,599 63,889 (8,691) 189,797
(*) Adjusted EBITDA figures for 2019 include impact of the
adoption of IFRS 16, and are therefore not on a like-for-like basis
with the 2018 figures.
31 December 2019 Turkey Russia Other Total
-------------------- -------- -------- ------ --------
Borrowings
TRY 164,800 - - 164,800
RUB - 153,213 - 153,213
-------------------- -------- -------- ------ --------
164,800 153,213 - 318,013
-------------------- -------- -------- ------ --------
Lease liabilities
TRY 93,054 - - 93,054
RUB - 163,081 - 163,081
-------------------- -------- -------- ------ --------
93,054 163,081 - 256,135
-------------------- -------- -------- ------ --------
Total 257,854 316,294 - 574,148
-------------------- -------- -------- ------ --------
1 January-31 December 2018 Turkey Russia Other Total
---------------------------------------- --------- --------- --------- ---------
Corporate revenue 203,958 277,945 - 481,903
Franchise revenue and royalty
revenue obtained from franchisees 257,313 43,946 - 301,259
Other revenue 23,399 50,313 - 73,712
Total revenue 484,670 372,204 - 856,874
- At a point in time 482,490 371,543 - 854,033
- Over time 2,180 661 - 2,841
---------------------------------------- --------- --------- --------- ---------
Operating profit 66,540 (3,173) (10,077) 53,290
Capital expenditures 36,797 42,213 - 79,010
Tangible and intangible disposals (7,318) (14,615) - (21,933)
Depreciation and amortization expenses (28,910) (24,358) (53,268)
Adjusted EBITDA 96,537 23,853 (9,810) 110,580
31 December 2018 Turkey Russia Other Total
---------------------------------------- --------- --------- --------- ---------
Borrowings
TRY 24,820 - - 24,820
RUB - 173,321 - 173,321
---------------------------------------- --------- --------- --------- ---------
24,820 173,321 - 198,141
---------------------------------------- --------- --------- --------- ---------
Lease liabilities
TRY 2,610 - - 2,610
RUB - 14,855 - 14,855
---------------------------------------- --------- --------- --------- ---------
2,610 14,855 - 17,465
---------------------------------------- --------- --------- --------- ---------
Total 27,430 188,176 - 215,606
---------------------------------------- --------- --------- --------- ---------
EBITDA, adjusted EBITDA, net debt, adjusted net debt, adjusted
net income and non-recurring and non-trade income/expenses are not
defined by IFRS. The amounts provided with respect to operating
segments are measured in a manner consistent with that of the
financial statements. These items determined by the principles
defined by Group management comprise income/expenses which are
assumed by the Group management to not be part of the normal course
of business and are non-recurring items. These items which are not
defined by IFRS are disclosed by Group management separately for a
better understanding and measurement of the sustainable performance
of the Group.
The reconciliation of adjusted EBITDAs for 2019 and 2018 is as
follows:
Excluding IFRS 16 impact
------------------------------- --------- ------------------------- ---------
TURKEY 2019 2019 2018
------------------------------- --------- ------------------------- ---------
Adjusted EBITDA (*) 134,599 108,701 96,537
------------------------------- --------- ------------------------- ---------
Non-recurring and non-trade
(income)/expenses per Group
management (*)
One off non-trading costs 131 131 191
Share-based incentives 1,336 1,336 896
------------------------------- --------- ------------------------- ---------
EBITDA 133,132 107,234 95,450
------------------------------- --------- ------------------------- ---------
Depreciation and amortization (50,468) (31,160) (28,910)
------------------------------- --------- ------------------------- ---------
Operating profit 82,664 76,074 66,540
------------------------------- --------- ------------------------- ---------
Excluding IFRS 16 impact
------------------------------- --------- ------------------------- ---------
RUSSIA 2019 2019 2018
------------------------------- --------- ------------------------- ---------
Adjusted EBITDA (*) 63,889 24,495 23,853
------------------------------- --------- ------------------------- ---------
Non-recurring and non-trade
(income)/expenses per Group
management (*)
One off non-trading costs (461) (461) 1,051
Share-based incentives (2,063) (2,063) 1,618
------------------------------- --------- ------------------------- ---------
EBITDA 66,413 27,019 21,184
------------------------------- --------- ------------------------- ---------
Depreciation and amortization (66,238) (32,800) (24,358)
------------------------------- --------- ------------------------- ---------
Operating loss 175 (5,781) (3,174)
------------------------------- --------- ------------------------- ---------
Excluding IFRS 16 impact
-------------------------------- --------- ------------------------- ---------
OTHER 2019 2019 2018
-------------------------------- --------- ------------------------- ---------
Adjusted EBITDA (*) (8,691) (8,691) (9,810)
-------------------------------- --------- ------------------------- ---------
Non-recurring and non-trade
(income)/expenses per Group
management (*)
One off non-trading costs (**) 3,082 3,082 267
-------------------------------- --------- ------------------------- ---------
EBITDA (11,773) (11,773) (10,077)
-------------------------------- --------- ------------------------- ---------
Depreciation and amortization - - -
-------------------------------- --------- ------------------------- ---------
Operating loss (11,773) (11,773) (10,077)
-------------------------------- --------- ------------------------- ---------
(*) EBITDA, adjusted EBITDA and non-recurring and non-trade
income/expenses are not defined by IFRS. These items are determined
by the principles defined by the Group management and comprise
income/expenses which are assumed by Group management to not be
part of the normal course of business and are non-trading items.
These items, which are not defined by IFRS, are disclosed by Group
management separately for a better understanding and measurement of
the sustainable performance of the Group. In addition, adjusted
EBITDA figures for 2019 includes impact of adoption of IFRS 16 and
not like for like basis with 2018 figures.
(**) The reason for the significant increase in one-off
non-trading costs is related to a 2017 expense from the IPO that
was invoiced in 2019.
The reconciliation of adjusted net income as of 31 December 2019
and 2018 is as follows:
Excluding IFRS 16 impact
------------------------------------------- -------- ------------------------- ---------
2019 2019 2018
------------------------------------------- -------- ------------------------- ---------
(Loss)/Profit for the period as reported (5,616) 3,619 (11,093)
------------------------------------------- -------- ------------------------- ---------
Non-recurring and non-trade (income)/expenses
per Group management (*)
Share-based incentives (727) (727) 2,514
One-off expenses 18 18 1,507
Adjusted net (loss)/Profit for the period (6,325) 2,910 (7,072)
------------------------------------------- -------- ------------------------- ---------
(*) Adjusted net income and non-recurring and non-trade
income/expenses are not defined by IFRS. Adjusted net income
excludes income and expenses which are not part of the normal
course of business and are non-recurring items. Management uses
this measurement basis to focus on core trading activities of the
business segments, and to assist it in evaluating underlying
business performance.
The average headcount for the Group is as follows:
31 December 2019 Netherlands Turkey Russia
----------------------- ------------ ------- -------
Number of employees 3 1,651 1,922
----------------------- ------------ ------- -------
31 December 2018 Netherlands Turkey Russia
----------------------- ------------ ------- -------
Number of employees 3 2,286 1,816
----------------------- ------------ ------- -------
NOTE 4 - REVENUE AND COST OF SALES
2019 2018
Corporate revenue 494,400 481,903
Franchise revenue and royalty
revenue obtained from franchisees 406,212 301,259
Other revenue 79,596 73,712
-------------------------------------
Revenue 980,208 856,874
------------------------------------- ---------- ----------
Cost of sales (636,466) (566,250)
------------------------------------- ---------- ----------
Gross profit 343,742 290,624
------------------------------------- ---------- ----------
Revenue recognised in relation to contract liabilities
The movements of performance obligations and revenue recognised
in relation to contract liabilities for the years ended 31 December
2019 and 2018 are as follows:
2019 2018
As of January 1, 28,943 21,983
Recognized as revenue (9,080) (2,841)
Increases due to new franchise agreements entered 13,042 9,801
As of December, 31 32,905 28,943
--------------------------------------------------- -------- --------
Unsatisfied long-term franchisee contracts
The Group recognised net sales amounting to TRY 4,668 with
respect to the performance obligations satisfied at a point in time
for the year ended 31 December 2019 (31 December 2018: 4,374).
The amount of performance obligations relating to ongoing
contracts of the Group that will be recognized in the future is TRY
37,572 (31 December 2018: TRY 33,326). The Group expects that this
amount will be recorded as revenue within 15 years.
NOTE 5 - EXPENSES BY NATURE
2019 2018
Employee benefit expenses 204,091 193,285
Depreciation and amortization expenses 116,706 53,268
---------------------------------------- -------- --------
320,797 246,553
---------------------------------------- -------- --------
NOTE 6 - OTHER OPERATING INCOME AND EXPENSES
Other income 2019 2018
-------------------------------------------- ------- -------
Marketing service income (*) 9,152 -
Interest income arising from
sales with extended terms 4,841 1,748
Gain from sale of property and equipment 2,222 6,354
Foreign exchange gains 2,674 1,651
Other 3,522 713
-------------------------------------------- ------- -------
22,411 10,466
-------------------------------------------- ------- -------
Other expense 2019 2018
-------------------------------------------- ------- -------
Legal and other provision expenses 3,783 821
Losses from sale of property and equipment 1,666 2,300
Foreign exchange losses 1,348 3,295
Other 1,072 945
-------------------------------------------- ------- -------
7,869 7,361
-------------------------------------------- ------- -------
Other operating income, net 14,542 3,105
-------------------------------------------- ------- -------
(*) For 2019, the marketing income mainly includes
cross-promotion income.
NOTE 7 - FINANCIAL INCOME AND EXPENSES
Foreign exchange gains / (losses) 2019 2018
---------------------------------------------- -------- ---------
Foreign exchange gains / (losses), net 6,840 (18,770)
Foreign exchange losses on lease liabilities (2,175) -
---------------------------------------------- -------- ---------
4,665 (18,770)
---------------------------------------------- -------- ---------
Financial income 2019 2018
---------------------------------------------- -------- ---------
Interest income on lease liabilities 13,736 -
Interest income 2,364 5,508
---------------------------------------------- -------- ---------
16,100 5,508
---------------------------------------------- -------- ---------
Financial expense 2019 2018
---------------------------------------------- -------- ---------
Interest expense 42,739 41,118
Interest expense on lease liabilities 35,767 -
Other 6,597 2,809
85,103 43,927
---------------------------------------------- -------- ---------
NOTE 8 - EARNINGS/(LOSS) PER SHARE
2019 2018
Average number of shares existing during the period 145,372,414 145,372,414
Net loss for the period attributable to
equity holders of the parent (5,616) (11,093)
----------------------------------------------------- ------------ ------------
Loss per share (0.0386) (0.0763)
----------------------------------------------------- ------------ ------------
The reconciliation of adjusted earnings per share as of 31
December 2019 and 2018 is as follows:
2019 2018
Average number of shares existing during the period 145,372,414 145,372,414
Net loss for the period attributable to equity
holders of the parent (5,616) (11,093)
---------------------------------------------------- ----------- -----------
Non-recurring and non-trade expenses
per Group management (*)
Share-based incentives (727) 2,514
One-off expenses 18 1,507
---------------------------------------------------- ----------- -----------
Adjusted net loss for the period
attributable to equity holders of the parent (6,325) (7,072)
---------------------------------------------------- ----------- -----------
Adjusted Earnings per share (*) (0.04) (0.05)
---------------------------------------------------- ----------- -----------
(*) Adjusted earnings per share and non-recurring and non-trade
income/expenses are not defined by IFRS. The amounts provided with
respect to operating segments are measured in a manner consistent
with that of the financial statements. These items determined by
the principles defined by the Group management comprises
income/expenses which are assumed by Group management to not be
part of the normal course of business and are non-recurring items.
These items which are not defined by IFRS are disclosed by Group
management separately for a better understanding and measurement of
the sustainable performance of the Group.
There are no shares or options with a dilutive effect and hence
the basic and diluted earnings per share are the same.
NOTE 9 - PROPERTY AND EQUIPMENT
1 January 2019 Additions Disposals Transfers Currency translation 31 December 2019
adjustments
----------------------- --------------- ---------- ---------- ---------- --------------------- -----------------
Cost
Machinery and
equipment 55,668 20,911 (11,553) - 11,799 76,825
Motor vehicles 32,963 3,825 (13,082) - 6,269 29,975
Furniture and fixtures 62,109 9,211 (9,544) - 776 62,552
Leasehold improvements 91,207 22,798 (13,987) - 13,100 113,118
Construction in
progress 3,024 1,795 - - 2,606 7,425
----------------------- --------------- ---------- ---------- ---------- --------------------- -----------------
244,971 58,540 (48,166) - 34,550 289,895
----------------------- --------------- ---------- ---------- ---------- --------------------- -----------------
Accumulated
depreciation
Machinery and
equipment (17,975) (11,120) 6,868 - (4,153) (26,380)
Motor vehicles (18,218) (8,290) 10,168 - (3,261) (19,601)
Furniture and fixtures (27,848) (7,271) 6,600 - (259) (28,778)
Leasehold improvements (44,889) (15,319) 9,242 - (4,127) (55,093)
----------------------- --------------- ---------- ---------- ---------- --------------------- -----------------
(108,930) (42,000) 32,878 - (11,800) (129,852)
----------------------- --------------- ---------- ---------- ---------- --------------------- -----------------
Net book value 136,041 160,043
----------------------- --------------- ---------- ---------- ---------- --------------------- -----------------
Depreciation expense of TRY 33,705 has been charged in cost of
sales and TRY 8,295 has been charged in general administrative
expenses.
1 January 2018 Additions Disposals Transfers Currency translation 31 December 2018
adjustments
----------------------- --------------- ---------- ---------- ---------- --------------------- -----------------
Cost
Machinery and
equipment 42,094 16,209 (10,028) 1,882 5,511 55,668
Motor vehicles 25,831 5,651 (1,283) - 2,764 32,963
Furniture and fixtures 58,646 12,609 (12,069) 2,652 271 62,109
Leasehold improvements 80,470 20,069 (15,169) 206 5,631 91,207
Construction in
progress 7,240 437 - (5,260) 607 3,024
----------------------- --------------- ---------- ---------- ---------- --------------------- -----------------
214,281 54,975 (38,549) (520) 14,784 244,971
----------------------- --------------- ---------- ---------- ---------- --------------------- -----------------
Accumulated
depreciation
Machinery and
equipment (11,494) (8,167) 2,988 - (1,302) (17,975)
Motor vehicles (10,596) (7,953) 1,143 - (812) (18,218)
Furniture and fixtures (26,953) (7,087) 6,261 - (69) (27,848)
Leasehold improvements (36,842) (13,812) 7,054 - (1,289) (44,889)
----------------------- --------------- ---------- ---------- ---------- --------------------- -----------------
(85,885) (37,019) 17,446 - (3,472) (108,930)
----------------------- --------------- ---------- ---------- ---------- --------------------- -----------------
Net book value 128,396 136,041
----------------------- --------------- ---------- ---------- ---------- --------------------- -----------------
Depreciation expense of TRY 23,311 has been charged in cost of
sales and TRY 13,708 has been charged in general administrative
expenses.
NOTE 10 - INTANGIBLE ASSETS
Currency
1 January 2019 translation 31 December 2019
Additions Disposals Transfers adjustments
------------------ ----------------- ------------ ------------ ------------ ----------------- ------------------
Cost
Key money 17,456 29,725 (1,192) - 4,633 50,622
Computer software 45,573 18,503 (1,349) - 5,945 68,672
Franchise
contracts 48,485 - - - 48,485
------------------ ----------------- ------------ ------------ ------------ ----------------- ------------------
111,514 48,228 (2,541) - 10,578 167,779
------------------ ----------------- ------------ ------------ ------------ ----------------- ------------------
Accumulated amortization
Key money (5,342) (6,967) 1,193 - (922) (12,038)
Computer software (17,178) (10,145) 1,220 - (2,886) (28,989)
Franchise
contracts (40,480) (4,848) - - - (45,328)
------------------ ----------------- ------------ ------------ ------------ ----------------- ------------------
(63,000) (21,960) 2,413 - (3,808) (86,355)
------------------ ----------------- ------------ ------------ ------------ ----------------- ------------------
Net book value 48,514 81,424
------------------ ----------------- ------------ ------------ ------------ ----------------- ------------------
Amortisation expense of TRY 12,994 has been charged in cost of
sales and TRY 8,966 has been charged in general administrative
expenses.
The Group does not have any intangible assets with an indefinite
useful life.
Currency
1 January translation 31 December
2018 Additions Disposals Transfers adjustments 2018
--------------------- ---------- ---------- ---------- ---------- ------------- ------------
Cost
Key money 8,755 9,691 (1,852) - 862 17,456
Computer software 31,502 14,344 (815) 520 22 45,573
Franchise contracts 48,485 - - - - 48,485
--------------------- ---------- ---------- ---------- ---------- ------------- ------------
88,742 24,035 (2,667) 520 884 111,514
--------------------- ---------- ---------- ---------- ---------- ------------- ------------
Accumulated
amortization
Key money (2,001) (4,974) 1,808 - (175) (5,342)
Computer software (10,855) (6,351) 28 - - (17,178)
Franchise contracts (35,555) (4,925) - - - (40,480)
--------------------- ---------- ---------- ---------- ---------- ------------- ------------
(48,411) (16,250) 1,836 - (175) (63,000)
--------------------- ---------- ---------- ---------- ---------- ------------- ------------
Net book value 40,331 48,514
--------------------- ---------- ---------- ---------- ---------- ------------- ------------
Amortisation expense of TRY 10,189 has been charged in cost of
sales and TRY 6,061 has been charged in general administrative
expenses.
Franchise contracts
The Group has recognized franchise contracts resulting from a
business combination on 26 January 2011 amounting to TRY 48,485 and
accounted for them as intangible assets in its consolidated
financial statements.
NOTE 11 - RIGHT OF USE ASSETS
Details of right-of-use assets as of 31 December 2019 and 1
January 2019 are as follows :
31 December 2019 1 January 2019(*)
Right-of-use assets
Properties 166,147 145,624
Vehicles 14,089 16,822
180,236 162,446
--------------------- ----------------- ------------------
Details of lease receivable as of 31 December 2019 and 1 January
2019 are as follows :
31 December 2019 1 January 2019(*)
Lease receivables
Current 16,618 13,857
Non-current 39,568 44,569
56,186 58,426
------------------- ----------------- ------------------
Details of lease liabilities as of 31 December 2019 and 1
January 2019 are as follows :
31 December 2019 1 January 2019(*)
Lease liabilities
Current 71,427 65,782
Non-current 184,708 172,555
256,135 238,337
------------------- ----------------- ------------------
(*) In the previous year, the Group only recognised lease assets
and lease liabilities (TRY17,465) in relation to leases that were
classified as finance leases under IAS 17, "Leases". The assets
were presented in property, plant and equipment and the liabilities
as part of the Group's borrowings. For adjustments recognised on
adoption of IFRS 16 on 1 January 2019, please refer to Note
2.4.
Movement of Right of use assets
Currency
1 January translation 31 December
2019 Additions Disposals adjustments 2019
---------------------------------- ---------- ---------- ---------- ------------ ------------
Right-of-use assets
Properties 145,624 62,333 (28,334) 26,034 205,657
Vehicles 16,822 2,522 (1,672) 6,103 23,775
162,446 64,855 (30,006) 32,137 229,432
---------------------------------- ---------- ---------- ---------- ------------ ------------
Depreciation charge of right-of-use assets
Properties - (44,549) 4,653 386 (39,510)
Vehicles - (8,197) 1,672 (3,161) (9,686)
- (52,746) 6,325 (2,775) (49,196)
---------------------------------- ---------- ---------- ---------- ------------ ------------
162,446 180,236
---------------------------------- ---------- ---------- ---------- ------------ ------------
For the year ended 31 December 2019, depreciation expense of TRY
44,859 has been charged to the cost of sales and TRY 7,887 has been
charged to general administrative expenses.
2019 2018
Interest expense on lease liabilities
Properties (18,932) -
Vehicles (4,035) -
(22,967) -
-------------------------------------- --------- -----
The total amount of interest of sub-lease income is TRY
13,736.
In 2019, the total cash outflow for principle of leases and
interest of leases is TRY 60,875 and TRY 13,736, respectively. In
2019, the total cash inflow for interest of leases is TRY 12,800,
respectively.
Expenses of low-value assets are TRY 60.
NOTE 12 - CASH AND CASH EQUIVALENTS
The details of cash and cash equivalents as of 31 December 2019
and 2018 are as follows:
31 December 2019 31 December 2018
Cash 897 818
Banks 16,744 16,367
Term bank deposits (less than three months) 42,745 -
Credit card receivables 10,542 11,259
--------------------------------------------- ----------------- -----------------
70,928 28,444
--------------------------------------------- ----------------- -----------------
(*) Maturity term of credit card receivables are 30 days on
average (31 December 2018: 30 days).
The details of functional currency of the banks is as
follows:
31 December 2019 31 December 2018
TRY 12,228 8,914
RUB 45,451 5,425
EUR 1,276 1,638
OTHER 534 390
------- ----------------- -----------------
59,489 16,367
------- ----------------- -----------------
NOTE 13 - TRADE RECEIVABLES AND PAYABLES
a) Short-term trade receivables
31 December 2019 31 December 2018
Trade receivables 89,419 50,903
Post-dated cheques 27,154 19,148
Receivables from related parties (Note 14) - 20
-------------------------------------------- ----------------- -----------------
116,573 70,071
-------------------------------------------- ----------------- -----------------
Less: Doubtful trade receivable (2,080) (92)
-------------------------------------------- ----------------- -----------------
Short-term trade receivables, net 114,493 69,979
-------------------------------------------- ----------------- -----------------
The average collection period for trade receivables is between
30 and 60 days (2018: between 30 and 60 days).
Movement of provision for doubtful receivables is as
follows:
2019 2018
---------------------- ------ -----
1 January 92 92
Current year charges 1,988 -
---------------------- ------ -----
31 December 2,080 92
---------------------- ------ -----
The group applied IFRS 9 simplified approach to measuring
expected credit losses, which uses a lifetime expected loss
allowance for all trade, lease and other receivables based on
historical losses. The Group analysed the impact of IFRS 9 and the
historical losses that were incurred in 2019 also impacted the
expected credit losses going forward, resulting in an additional
TRY 606 recorded as provision for doubtful receivables. The Group
also assessed whether the historic pattern would change materially
in the future. The expected credit loss applied per aging bucket is
shown as below:
Not due 0-30 days 31-90 days 91-180 days 181-360 days Over 360 days
0.02% 0.15% 0.32% 0.59% 11.3% 26.4%
129,995 971 3,726 1,236 1,788 199
---------- ------------ -------------- ---------------- ------------------ ---------------------
Lease receivables has no history if default and expected credit
loss percentages are close to zero and its effect is immaterial, so
the table below consists of only trade and other receivables
b) Long-term trade receivables
31 December 2019 31 December 2018
Trade receivables 7,467 10,729
Post-dated cheques 15,955 10,032
-------------------- ----------------- -----------------
23,422 20,761
-------------------- ----------------- -----------------
(*) Post-dated cheques are the receivables from franchisees resulting from store openings.
c) Short-term trade and other payables
31 December 2019 31 December 2018
Trade payables 108,995 70,635
Other payables 12,183 3,513
---------------- ----------------- -----------------
121,178 74,148
---------------- ----------------- -----------------
The weighted average term of trade payables is less than three
months. Short-term payables with no stated interest are measured at
original invoice amount unless the effect of imputing interest is
significant
(31 December 2019 and 2018: less than three months).
NOTE 14 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES
The details of receivables and payables from related parties as
of 31 December 2019 and 2018 and transactions is as follows:
a) Key management compensation
31 December 2019 31 December 2018
------------------------------ ----------------- -----------------
Short-term employee benefits 18,212 16,243
Share-based incentives 2,002 2,514
------------------------------ ----------------- -----------------
20,214 18,757
------------------------------ ----------------- -----------------
There are no loans, advance payments or guarantees given to key
management.
b) Board compensation
31 December 2019
-------------------------------------------------------------------------------------
Base Annual Long-term Total
salary Benefits Pension bonus incentives Total (local
(TRY) (TRY) (TRY) (TRY) (TRY) (TRY) currency)
--------------- -------------- --------- -------- -------- ----------- ---------- -------------
Executive
Directors
Aslan Saranga 2,295,945 171,479 - 748,086 614,971 3,830,481 3,830,481
Frederieke
Slot 634,840 146,013 224,733 - - 1,005,586 EUR 158,400
--------------- -------------- --------- -------- -------- ----------- ---------- -------------
Non-Executive
Directors
Peter Williams 1,083,930 - - - - 1,083,930 GBP 150,000
Tom Singer 502,221 - - - - 502,221 GBP 69,500
Seymur - - - - - - -
Tarı
İzzet - - - - - - -
Talu
Aksel ahin - - - - - - -
--------------- -------------- --------- -------- -------- ----------- ---------- -------------
31 December 2018
-------------------------------------------------------------------------------------
Base Annual Long-term Total
salary Benefits Pension bonus incentives Total (local
(TRY) (TRY) (TRY) (TRY) (TRY) (TRY) currency)
--------------- -------------- --------- -------- -------- ----------- ---------- -------------
Executive
Directors
Aslan Saranga 2,000,000 150,599 0 778,667 409,981 3,339,247 3,339,247
Frederieke
Slot 566,140 130,212 200,414 - - 896,766 EUR 158,400
--------------- -------------- --------- -------- -------- ----------- ---------- -------------
Non-Executive
Directors
Peter Williams 957,765 - - - - 957,765 GBP 150,000
Tom Singer 443,764 - - - - 443,764 GBP 69,500
Seymur - - - - - - -
Tarı
İzzet - - - - - - -
Talu
Aksel ahin - - - - - - -
--------------- -------------- --------- -------- -------- ----------- ---------- -------------
Notes to the table - methodology
Base salary
This represents the cash paid or receivable in respect of the
financial year.
Benefits
This represents the taxable value of all benefits paid or
receivable in respect of the relevant financial year. Aslan
Saranga's benefits included private health cover, and company car.
Frederieke Slot's benefits included medical disability allowance,
mobility allowance and education, communication and IT
allowances.
Pension
Aslan Saranga receives no pension provision; Frederieke Slot
receives a pension allowance worth 36% of base salary.
Annual bonus
This represents the total bonus payable for the relevant
financial year under the ADBP.
Long-term incentives
This column relates to the expense recognised for the LTIP
awards during the period in accordance with IFRS. Please note that
in the remuneration report on page 48, the value of vested LTIP
awards is included in the remuneration table. Since no LTIP awards
have been vested to Executive Directors during the period, this
column has a zero figure in the remuneration report.
On 8 May 2018, Aslan Saranga was granted an LTIP award amounting
to 279,322 shares (share price GBP 1.878), which will vest in May
2021 subject to achievement of an EBITDA growth target. On 3 May
2019, Aslan Saranga was granted an LTIP award amounting to 332,706
shares (share price GBP 0.88) which will vest in May 2022 subject
to achievement of an EBITDA growth target.
Local currency totals
Part of Aslan Saranga's remuneration and the whole of Frederieke
Slot's remuneration is paid in Euros and Peter Williams' and Tom
Singer's remuneration is wholly paid in Pound Sterling. Total
amounts received by each individual in local currency are recorded
in the final column of the above table. In the other columns of the
table, remuneration has been converted into Turkish Lira for
consistency with the financial statements.
NOTE 15 - OTHER RECEIVABLES, ASSETS AND LIABILITIES
Other current assets
31 December 2019 31 December 2018
---------------------------------- ----------------- -----------------
Advance payments 36,217 9,687
Deposits for loan guarantees (1) 18,683 24,195
Lease receivables 16,618 -
Prepaid taxes and VAT receivable 2,740 3,177
Prepaid marketing expenses 1,486 2,018
Prepaid insurance expenses 1,029 4,857
Contract assets related to
franchising contracts (2) 482 438
Other 4,610 1,212
---------------------------------- ----------------- -----------------
Total 81,865 45,584
---------------------------------- ----------------- -----------------
(1) In December 2019, the Group repaid a portion of its loans to
Sberbank Moscow and the TRY31,643 (RUB 420 million) cash deposit
condition that was made as collateral by the Fidesrus.
(2) The Group incurs certain costs with Domino's Pizza
International related to the set up of each franchise contract and
IT systems used for recording of franchise revenue.
Other non-current assets
31 December 2019 31 December 2018
----------------------------- ----------------- -----------------
Lease receivables 39,568 -
Long-term deposits for
loan guarantees (1) 21,624 8,342
Prepaid marketing expenses 8,232 7,173
Contract assets related to
franchising contracts (2) 4,186 3,936
Deposits given 1,861 5,909
Other - 29
----------------------------- ----------------- -----------------
Total 75,471 25,389
----------------------------- ----------------- -----------------
(1) In December 2019, the Group repaid its 9.7% loan in the
amount of RUB 690 million. The loan carries a TRY 31,643 (RUB 420
million) cash deposit condition that was made as collateral by the
Russian operating company. The principal amount is payable monthly
from August 2019.
(2) The Group incurs certain costs with Domino's Pizza
International related to the set up of each franchise contract and
IT systems used for recording of franchise revenue.
Other current liabilities
31 December 2019 31 December 2018
----------------------------------------------------- ----------------- -----------------
Taxes and funds payable 13,351 6,047
Payable to personnel 8,044 6,970
Volume rebate advances 7,805 942
Unused vacation liabilities 7,523 6,404
Performance bonuses 4,961 7,408
Social security premiums payable 4,109 3,588
Advances received from franchisees 4,057 2,243
Contract liabilities from franchising contracts (1) 2,908 5,727
Other expense accruals 11,254 2,791
----------------------------------------------------- ----------------- -----------------
Total 64,012 42,120
----------------------------------------------------- ----------------- -----------------
(1) The Group incurs certain revenue with the set up of each
franchise contract and these franchise fee revenues are deferred
over the period of the franchise agreement.
Other non-current liabilities
31 December 2019 31 December 2018
--------------------------------------- ----------------- -----------------
Contract liabilities from franchising
contracts (1) 34,664 27,599
Long term provisions for
employee benefits 2,051 1,665
Other 2,377 774
Total 39,092 30,038
--------------------------------------- ----------------- -----------------
(1) The Group incurs certain revenue with the set up of each
franchise contract and these franchise fee revenues are deferred
over the period of the franchise agreement.
NOTE 16 - FINANCIAL LIABILITIES
31 December 2019 31 December 2018
Short term bank borrowings 164,800 24,820
---------------------------------------------------- ----------------- -----------------
Short-term financial liabilities 164,800 24,820
---------------------------------------------------- ----------------- -----------------
Short-term portions of long-term borrowings 54 11,721
Short-term portions of long-term leases 71,427 7,789
----------------------------------------------------
Current portion of long-term financial liabilities 71,481 19,510
---------------------------------------------------- ----------------- -----------------
Total short-term financial liabilities 236,281 44,330
---------------------------------------------------- ----------------- -----------------
Long-term bank borrowings 153,159 161,600
Long-term leases 184,708 9,676
----------------------------------------------------
Long-term financial liabilities 337,867 171,276
---------------------------------------------------- ----------------- -----------------
Total financial liabilities 574,148 215,606
---------------------------------------------------- ----------------- -----------------
The summary information of short-term and long-term bank
borrowings is as follows:
31 December 2019
Currency Maturity Interest rate (%) Short-term Long-term
---------------- ----------- ------------------ ----------- ----------
TRY borrowings Revolving 10.88 164,800 -
RUB borrowings 2024 9.70 54 153,159
164,854 153,159
---------------------------- ------------------ ----------- ----------
31 December 2018
Currency Maturity Interest rate Short-term Long-term
(%)
---------------- ----------- -------------- ----------- ----------
RUB borrowings 2024 9.70 11,721 161,600
TRY borrowings Revolving 24.71 24,820 -
---------------- ----------- -------------- ----------- ----------
36,541 161,600
---------------------------- -------------- ----------- ----------
The loan agreement between Sberbank Moscow and Domino's Russia
is subject to covenant clauses whereby the Group, Domino's Turkey
and Domino's Russia are required to meet certain ratios. The
financial indicator of:
- the Domino's Russia; which requires the ratio of financial
debt to adjusted EBITDA for the relevant period, should not be more
than 11;
- the Domino's Turkey ; which requires the ratio of financial
debt to adjusted EBITDA for the relevant period, should not be more
than 3;
- the Group; which requires the ratio of financial debt to
adjusted EBITDA for the relevant period, should not be more than
3.5.
During the validity period hereof, the number of the restaurant
chain (own and franchised) of Domino's Turkey should be not less
than 524 units as of the end of 2018; Annual level of the adjusted
EBITDA of the Turkish division should be not less than TRY 87
million during 2018-2020.
Throughout the period the Group, Domino's Russia and Domino`s
Turkey have met the covenant clauses of Sberbank Moscow.
The redemption schedule of the borrowings as of 31 December 2019
and 2018 is as follows:
31 December 2019 31 December 2018
To be paid in one year 164,854 36,541
To be paid between one to two years 4,627 19,044
To be paid between two to three years 44,522 25,404
To be paid between three years and more 104,010 117,152
----------------------------------------- ----------------- -----------------
318,013 198,141
----------------------------------------- ----------------- -----------------
The redemption schedule of the leases as of 31 December 2019 and
2018 is as follows:
31 December 2019 31 December 2018
Leases to be paid in one year 71,427 7,789
Leases to be paid between one to two years 77,979 6,128
Leases to be paid between two to three years 86,849 3,548
Leases to be paid between three years and more 19,880 -
------------------------------------------------ ----------------- -----------------
256,135 17,465
------------------------------------------------ ----------------- -----------------
The details of the finance lease liabilities as of 31 December
2019 and 2018 are as follows:
31 December 2019 31 December 2018
Total financial lease payments - 25,209
Interest to be paid in upcoming years - (7,744)
--------------------------------------- ------------------ -----------------
- 17,465
---------------------------------------------------------- -----------------
As of 31 December 2019 and 2018, net financial liabilities
reconciliation is below:
31 December 2019 31 December 2018
------------------------------------------------------------------ ----------------- -----------------
Cash and cash equivalents 70,928 28,444
Financial liabilities and leases to be paid in one year (236,281) (44,330)
Financial liabilities and leases to be paid in one to five years (337,867) (171,276)
------------------------------------------------------------------ ----------------- -----------------
(503,220) (187,162)
------------------------------------------------------------------ ----------------- -----------------
31 December 2019 31 December 2018
---------------------------------------------- ----------------- -----------------
Cash and cash equivalents 70,928 28,444
Financial liabilities and lease - fixed rate (316,294) (188,176)
Financial liabilities - floating rate (257,854) (27,430)
---------------------------------------------- ----------------- -----------------
(503,220) (187,162)
---------------------------------------------- ----------------- -----------------
31 December 2019 Short term financial Long term financial
liabilities and leases liabilities and leases Total
-------------------------------- ------------------------------- ------------------------------- ------------
1 January
financial liabilities (44,330) (171,276) (215,606)
--------------------------------
Net cash flow effect, loans
received (147,443) (17,790) (165,233)
Net cash flow effect, loans
paid 5,668 79,785 85,453
Net cash flow effect, leasing
payments 60,875 - 60,875
Interest of leases paid 22,031 - 22,031
Lease liability (IFRS 16) (88,045) (211,662) (299,707)
Interest on financial
liabilities (17,311) - (17,311)
Currency translation
adjustments (27,726) (16,924) (44,650)
31 December financial
liabilities (236,281) (337,867) (574,148)
-------------------------------- ------------------------------- ------------------------------- ------------
Short term financial Long term financial
31 December 2018 liabilities and leases liabilities and leases Total
-------------------------------- ------------------------------- ------------------------------- ----------
1 January
financial liabilities (142,152) (85,753) (227,905)
-------------------------------- ------------------------------- ------------------------------- ----------
Net cash flow effect, loans
received (48,345) (11,503) (59,848)
Net cash flow effect, loans
paid 91,887 13,070 104,957
Net cash flow effect, leasing
payments 15,192 4,054 19,246
Other non-cash transaction,
leasing payment (11,122) (3,122) (14,244)
Unrealised FX gain and loss (1,568) (9,904) (11,472)
Interest on financial
liabilities (4,159) - (4,159)
Currency translation
adjustments (23,282) 1,101 (22,181)
-------------------------------- ------------------------------- ------------------------------- ----------
31 December financial
liabilities (123,549) (92,057) (215,606)
-------------------------------- ------------------------------- ------------------------------- ----------
The reconciliation of adjusted net debt as of 31 December 2019
and 2018 is as follows:
2019 2018
-------------------------------------- --------- ---------
Short term bank borrowings 164,854 36,541
Short-term portions of
long-term lease borrowings 71,427 7,789
Long-term bank borrowings 153,159 161,600
Long-term lease and borrowings 184,708 9,676
-------------------------------------- --------- ---------
Total borrowings 574,148 215,606
-------------------------------------- --------- ---------
Cash and cash equivalents (-) (70,928) (28,444)
-------------------------------------- --------- ---------
Net debt 503,220 187,162
-------------------------------------- --------- ---------
Non-recurring items
per Group management
Long-term deposit for loan guarantee (34,253) (32,537)
Adjusted net debt (*) 468,967 154,625
-------------------------------------- --------- ---------
(*) Net debt, adjusted net debt and non-recurring and non-trade
items are not defined by IFRS. Adjusted net debt includes cash
deposits used as a loan guarantee and cash paid, but not collected,
during the non-working day at the year end. Management uses these
numbers to focus on net debt to take into account deposits not
otherwise considered cash and cash equivalents under IFRS.
NOTE 17 - TAX ASSETS, LIABILITIES AND TAX EXPENSE
Corporate tax
The Group is subject to taxation in accordance with the tax
regulations and the legislation effective in the countries in which
the Group companies operate. Therefore, provision for taxes, as
reflected in the consolidated financial statements, has been
calculated on a separate-entity basis.
The Netherlands
Dutch tax legislation does not permit a Dutch parent company and
its foreign subsidiaries to file a consolidated Dutch tax return.
Dutch resident companies are taxed on their worldwide income for
corporate income tax purposes at a statutory rate of 25%. No
further taxes are payable on this profit unless the profit is
distributed.
Services incurred by Dutch parent companies may generally be
divided into two kinds of services being group services for which
costs are incurred for the economic and commercial benefit of
subsidiaries and shareholder services for which costs are incurred
for activities provided in the capacity of the shareholder. All
costs incurred by the Company are shareholder services (costs
incurred for activities provided in the capacity of shareholder)
and not group services (costs incurred for the economic or
commercial benefit of subsidiaries).
Since shareholder services are not for the benefit of any one
specific subsidiary, it is not required to re-charge these fees or
costs to a subsidiary or to subsidiaries.
If certain conditions are met, income derived from foreign
subsidiaries is tax exempted in the Netherlands under the rules of
the Dutch participation exemption. However, certain costs such as
acquisition costs are not deductible for Dutch corporate income tax
purposes. Furthermore, in some cases the interest payable on loans
to affiliated companies is non-deductible.
When income derived by a Dutch company is subject to taxation in
the Netherlands as well as in other countries, generally avoidance
of double taxation can be obtained under the extensive Dutch tax
treaty network or under Dutch domestic law.
Dividend distributions are subject to 15% Dutch withholding tax.
However, under the Netherlands' extensive tax treaty network, this
rate can, in many cases, be significantly reduced if certain
conditions are met.
Turkey
The Corporate Tax Law was amended by Law No, 5520, dated 13 June
2006. Most of the articles of the new Corporate Tax Law (No 5520)
came into force on 1 January 2006. Corporate tax is payable at a
rate of 22% (31 December 2018: 22%) on the total income of the
Group after adjusting for certain disallowable expenses, exempt
income and investment and other allowances (e.g. research and
development allowance). No further tax is payable unless the profit
is distributed (except for withholding tax at the rate of 19.8%,
calculated on an exemption amount if an investment allowance is
granted in the scope of Income Tax Law Temporary Article 61).
With the Law on Amendments to Certain Laws and Tax Laws and
Decrees by the Courts dated
28 November 2017, the tax rate has been changed to 22% for
corporate tax and advance tax of corporate earnings for the 2018,
2019 and 2020 taxation periods.
Companies are required to pay advance corporate tax quarterly at
the rate of 22% on their corporate income in Turkey. Advance tax is
payable by the 17(th) of the second month following each calendar
quarter end. Advance tax paid by corporations is credited against
the annual corporate tax liability. If, despite offsetting, there
remains a paid advance tax amount, it may be refunded or offset
against other liabilities to the government.
Russia
Income taxes have been provided for in the consolidated
financial statements in accordance with legislation enacted or
substantively enacted by the end of the reporting period. The
income tax charge comprises current tax and deferred tax and is
recognised in profit or loss for the year, except if it is
recognised in other comprehensive income or directly in equity
because it relates to transactions that are also recognised, in the
same or a different period, in other comprehensive income or
directly in equity.
Current tax is the amount expected to be paid to, or recovered
from, the taxation authorities in respect of taxable profits or
losses for the current and prior periods. Taxable profits or losses
are based on estimates if financial statements are authorised prior
to filing relevant tax returns. Taxes other than on income are
recorded within operating expenses as established in Chapter 25 of
the Tax Code of the Russian Federation. Corporate tax is payable at
a rate of 20% (31 December 2018: 20%) as identified in Article 247
of the Tax Code of the Russian Federation Special rules may apply
in cases where a different from 20% tax rate is used.
Deferred income tax is provided using the balance sheet
liability method for tax loss carry forwards and temporary
differences arising between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes. In
accordance with the initial recognition exemption, deferred taxes
are not recorded for temporary differences on initial recognition
of an asset or a liability in a transaction other than a business
combination if the transaction, when initially recorded, affects
neither accounting nor taxable profit. Deferred tax balances are
measured at tax rates enacted or substantively enacted at the end
of the reporting period, which are expected to apply to the period
when the temporary differences will reverse, or the tax loss carry
forwards will be utilised.
Corporate tax liability for the year consists of the
following:
2019 2018
-------------------------- -------- --------
Corporate tax calculated 15,318 11,579
Prepaid taxes (-) (8,947) (4,608)
-------------------------- -------- --------
Tax liability 6,371 6,971
-------------------------- -------- --------
Tax income and expenses included in the statement of
comprehensive income are as follows:
2019 2018
-------------------------------------- --------- ---------
Current period corporate tax expense (15,318) (11,579)
Deferred tax income / (expense) 2,974 4,385
-------------------------------------- --------- ---------
Tax expense (12,344) (7,194)
-------------------------------------- --------- ---------
The reconciliation of the tax expense in the statement of
comprehensive income is as follows:
2019 2018
Profit before tax 6,728 (3,899)
Corporate tax at statutory rates (25%) (1,682) 975
Disallowable expenses (7,423) (5,834)
Unrecognised tax losses (5,287) (2,714)
Differences in tax rates 1,646 (323)
Other, net 402 702
---------------------------------------- --------- --------
Total tax expense (12,344) (7,194)
---------------------------------------- --------- --------
The breakdown of cumulative temporary differences and the
resulting deferred income tax assets/liabilities at 31 December
2019 and 2018 using statutory tax rates are as follows:
31 December 2019 31 December 2018
---------------------------- ----------------------------
Deferred Deferred
tax tax
Temporary assets/ Temporary assets/
differences (liabilities) differences (liabilities)
------------------------------------ ------------ -------------- ------------ --------------
Carry forward tax losses
(*) 44,926 8,985 38,001 7,600
Contract liabilities from
franchising contracts 34,826 7,486 28,943 6,367
Expense accruals 18,529 3,708 9,515 2,093
Bonus accruals 4,695 1,011 7,168 1,517
Unused vacation liabilities 3,368 741 2,663 586
Legal provisions 3,606 793 1,816 399
Provision for employee termination
benefit 2,051 451 1,665 366
Right of use assets and
lease liability 13,625 2,845 - -
Other 1,173 211 3,220 554
------------------------------------ ------------ -------------- ------------ --------------
126,799 26,231 92,991 19,482
Property, equipment and
intangible assets (36,642) (8,171) (39,727) (7,861)
------------------------------------ ------------ -------------- ------------ --------------
(36,642) (8,171) (39,727) (7,861)
Deferred income tax assets,
net 18,060 11,621
(*) Consists of carry forward losses of Domino's Russia.
Deferred income tax assets recognition of Fidesrus
Deferred tax assets are reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the
deferred tax asset to be utilised. Various factors are considered
to assess the probability of the future utilisation of deferred tax
assets, including past operating results, operational plan,
expiration of tax losses carried forward, and tax planning
strategies. If actual results differ from these estimates or if
these estimates must be adjusted in future periods, the financial
position, results of operations and cash flows may be negatively
affected. In the event that the assessment of future utilisation of
deferred tax assets must be reduced, this reduction will be
recognised in the income statement.
Based on the change in the tax code in the Russian Federation
after 31 December 2015, previously applied limitation on carry
forward tax losses for a ten-year period has been abolished and any
losses incurred since 2007 will be carried forward until fully
recognised.
Domino's Russia recognizes tax assets for the tax losses carried
forward to the extent that the realisation of the related tax
benefit through the future taxable profits is probable. Domino's
Russia recognise deferred income tax assets arising from tax
losses, tax discounts and other temporary differences with the
estimates and assumptions relying on Domino's Russia management's
five-years business plan and potential growth opportunities in
Russia.
Movement of the deferred tax for the year ended 31 December 2019
and 2018 are as follows:
2019 2018
Balance at the beginning of the year 11,622 5,929
Charged to the statement of income 2,974 4,746
Currency translation difference 3,434 866
Charged to other comprehensive income 30 81
Balance at the end of the year 18,060 11,622
NOTE 18 - SUBSEQUENT EVENTS
According to an amendment to the Sberbank Loan Agreement signed
by the Group's Russian subsidiary and Sberbank, the Company and its
Turkish subsidiary were required to sign the amendment as
guarantors by 27 February 2020. At 20 March 2020, the deadline to
meet this requirement has been extended by Sberbank to 30 April
2020. The Group expects no difficulty in meeting this
requirement.
We see the potential for a prolonged period of uncertainty
following the COVID-19 worldwide outbreak and related market
volatility, which have had relatively little impact on our business
operations year to date. Currently, our stores are open and
operating as normal with the exception that customers are not able
to eat-in in our Turkish stores (although our delivery and
take-away businesses continue as normal). Future adverse impacts
from the COVID-19 outbreak may include, but are not limited to,
employees contracting the disease, difficulty in recruiting new
employees, decrease in demand for our products, reduced store
operating hours, temporary bans imposed by government on eat-in
and/or take-away services, store closures for an unspecified period
of time and the Group not being able to perform its obligations
under the Master Franchise Agreements. These conditions indicate
the existence of a material uncertainty which may cast significant
doubt about the Company's ability to continue as a going concern
and, therefore, its ability to realise its assets and discharge its
liabilities in the normal course of business.
We have no indication whether governmental measures will have an
effect in preventing a further spread of the disease around the
world and therefore the duration of the pandemic. If the pandemic
and its impact on the business last for a protracted period it is
likely to have a more detrimental effect on the financial
performance of the Group. The Group has taken proactive measures to
ensure that our customers and employees continue to be safe. The
Group has already established an internal task force to ensure that
the supply chain is managed, critical inventory is available, and
restaurants remain adequately staffed. We appreciate that the
Turkish government has indicated its preparedness to support
companies and encourage banks to maintain access to credit
facilities so as to assist the corporate sector manage through the
crisis and maintain employment.
...........................
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR DZGZFLVVGGZM
(END) Dow Jones Newswires
March 27, 2020 03:00 ET (07:00 GMT)
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